Real estate players should leverage on structural trend shifts post-pandemic, says CBRE

Investors and asset owners should leverage the structural trends in the commercial industry, says CBRE. 

With various leading indicators showing that an economic recovery is well underway for Singapore, real estate players should leverage the structural trend shifts to position their assets post-pandemic or invest in these growth areas, according to CBRE.

“Even pre-pandemic, structural shifts have begun to alter real estate. These changes have since been accelerated and with a recovery underway, it will be beneficial for investors and asset owners to be acquainted with structural trends and changes, so that they can adjust their real estate strategies accordingly – either to invest in, or to cater their assets to areas of growth and demand,” said Catherine He, Director of Research for Southeast Asia at CBRE.

For instance, the Central Business District Incentive (CBDI) and the Strategic Development Incentive (SCDI) schemes, which encourage the redevelopment of older office buildings to mixed-use developments, have become more pertinent with the rise of the flexible working trends.

CBRE revealed that office transaction values have been robust since the announcement of the schemes, rising from 6% of total investment sales in Q1 2021 to 24.2% of investment sales in Q1 2021.

“This is likely motivated by the anticipated rental recovery, and redevelopment potential of some major assets,” said CBRE.

It noted that the resurgence in office sales underscores Singapore’s stability and ‘safe haven’ reputation.

“This provides support for office space demand and gives investors long term confidence in the local office sector.”

Meanwhile, incorporating food production in retail spaces will enable restaurants to monetise the massive growth in on-demand food delivery as well as provide retailers with the flexibility to expand beyond their physical space.

“Setting aside retail space for cloud kitchens with new dining concepts, some with dine-in areas, would help drive traffic to the mall. This could also become a new norm, as F&B players shift their focus towards takeaways and deliveries as an essential part of their operations,” said CBRE.

Retail landlords with ageing malls could capitalise on housing cloud kitchens, with older suburban malls as likely candidates given their proximity to residential areas and lower rents.

Shophouses also make a suitable location for cloud kitchens, especially those with F&B use approval.

And with malls losing a portion of their traditional tenant base, vacant space is taken up by a variety of new uses, leading to a more refreshing tenant mix that features work and living spaces within malls.

“This results in a symbiotic relationship as it creates additional traffic for the mall on one hand, and convenience for the users of these workspaces on the other,” said CBRE.

It added that retailers should also integrate online and offline strategies to provide their customers with a seamless shopping experience while also helping their tenants.

Some retail players, such as CapitaLand and Frasers Property, have set up their own e-commerce platforms to complement sales at their malls, while retailers such as NTUC FairPrice and Decathlon use their physical stores as click-and-collect locations or fulfilment centres.

Over at the industrial front, industrial space would have to be repurposed to cater to the growing demand for specialised uses such as prime logistics and cold storage.

“Industrial asset owners could take advantage of higher prices and demand to do a sale-and-leaseback to free up capital by going with an asset-light approach and leverage on their underlying credit strength,” said CBRE.

Business parks, on the other hand, cater to growth sectors, allowing users to achieve “the same utility of good quality office space at lower costs, making them attractive assets for rental yield and capital appreciation”.

CBRE believes the demand for business parks will be more acute with the growing importance of the biomedical sector, and the Singapore government “investing heavily in providing the relevant infrastructure and encouraging global pharmaceutical companies to set up their bases here”.

Source: CommercialGuru, 25 Jun 2021